Summary:

After an apt instrumental version of Phil Collins’ “Against All Odds,” a Microsoft (NSDQ: MSFT) rep explained that the call was moved from t…

imageAfter an apt instrumental version of Phil Collins’ “Against All Odds,” a Microsoft (NSDQ: MSFT) rep explained that the call was moved from the scheduled afternoon time to the morning after deciding to release the news that it would be laying off 5,000 staffers over the next year, with 1,400 getting the pink slip today. Chris Liddell, SVP/CFO (pictured), discussed the impact of the global financial collapse on PC sales, though he did note that in spite of the weak economy, ad revenue was up 7 percent — about $43 million — to $664 million. Liddell also insisted that while it will try to cut costs — including wage freezes and reducing vendor contracts — it will continue investments in “key areas.”

Advertising: Going over the ad categories, search was up in “double-digits,” though display growth was slower, Bill Koefeod, investor relations, said without offering specifics.

More after the jump.

Release | Transcript (via Seeking Alpha)

Entertainment Division and Devices: XBox sales were another positive for Microsoft in an otherwise dismal Q4. In particular, European XBox sales doubled over the previous holiday season. Xbox Live membership is now at 17 million.

Outlook: Liddell said the second half of the year doesn’t look good, especially for the PC market. Ad spending will remain weak, with display continuing to worsen. Shrinking consumer spending will also impact XBox sales in the second half.

Ballmer’s perspective: “We are in the midst of a once in a lifetime of change in economic conditions. The economy is not in a recession, but in a resetting of economic conditions. Neither the consumer nor the business side is immune. There are three things to focus in on: number one, innovation; number two is market share, and we always focus on this, but in these times it’s more important; and three is efficiency. The question now is, how can you get more done for less. Even while we take out 5,000 jobs, we will add 1,000 jobs in areas like search.”

Job cuts and numbers: Following Ballmer’s remarks, Lidell defended Microsoft’s actions to cut costs in response to a question about its handling of declining margin percentages. He insisted that they’ve taken the “right degree of action.” Asked if the 5,000 job cuts include outside contracts, Lidell said that they did not. The company would be looking at those positions separately. Ballmer reiterated that they would be “adding a few thousand jobs and that they may end up just cutting 2- or 3,000.”

M&A activity: Don’t expect any major deals, Lidell said. “The market hasn’t lowered expectations, though prices are coming down. We will still buy small and medium businesses. The opportunity after the next two quarters will be very good and that’s why we’re trying to maintain capital.” As for any update on talks with Yahoo (NSDQ: YHOO), Ballmer laughed and said, “I’ve said a lot about Yahoo, been very candid that there would be a lot of consumer advantages [to a search deal, but not a complete acquisition]. I don’t think I have anything more to say about Yahoo… I know [Yahoo CEO] Carol Bartz from her Autodesk days. We’ve had conversations and I’m sure we will have more things to say.” Circling back to Microsoft’s view of larger acquisitions in general, Ballmer added: “We’ve only bought one thing over a $1.5 billion. We’re not big M&A guys.”

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